HSBC's Turkey forecast: Interest rate cuts expected

The UK-based bank HSBC has published a report on the Turkish economy. The report includes expectations regarding inflation and interest rate policies.

In the report prepared by HSBC Economist Melis Metiner, it was noted that no change in the policy rate is expected until the first quarter of 2025, but that they expect front-loaded interest rate cuts in the first half of 2025.

'THINGS COULD GO WRONG'

Participants stated that these risks could create new pressure on the balance of payments and have a negative impact on economic activity. They say that a slight contraction is expected in the third and fourth quarters of 2024, followed by a gradual recovery in 2025. The report also stated, "We expect inflation to be above the central bank's forecast," and included the remarks, "If policymakers are serious about keeping inflation expectations close to the target, we expect the pace of interest rate cuts to bring inflation under control and keep real interest rates high for a long time."

'EXPECTATIONS ON INTEREST RATES AND INFLATION'

Regarding the interest rate and inflation expectations in the report, it was projected that the interest rate will remain at the 50 percent level until the first quarter of 2025. While it was stated that the expectation of a soft landing for Turkey is maintained, the fact that risks to growth remain on the downside was among the notable details of the report. While the bank changed its interest rate expectations, it increased its rate cut forecasts.